Ivorydale: Model for more P&G closings?

Procter & Gamble's historic Ivorydale facility in St. Bernard now has numerous tenants. The old main gate is now the entrance to the St. Bernard Soap Company.(Photo: The Enquirer/Glenn Hartong)Buy Photo

Back in the day, Procter & Gamble's Ivorydale plants employed 2,000 workers making Head & Shoulders shampoo, Crest toothpaste and Secret deodorant. Crisco shortening and Duncan Hines cake mixes rolled off assembly lines on their way to homes across America.

Today, the cake mix lines are gone, the soap-making and Crisco productions sold off to other companies. Just one piece of P&G's once-sprawling factory operation remains: a chemical plant that employs 90 people making glycerin and refining raw materials to support laundry brands like Tide.

Could this factory be next to go?

P&G executives won't discuss their plants, but disclosures in recent months show that plans are accelerating to review the nearly three dozen North American factories for possible closure or consolidation.

Months after he returned as CEO in May 2013, A.G. Lafley said he was looking to "significantly reduce the number of manufacturing plants" in the U.S. and Canada. Earlier this year, he said he wanted factories to be more versatile, producing products from more than one brand or business line.

This spring, CFO Jon Moeller estimated that P&G could save $200 million to $300 million in each of the next three to four years with consolidation among its U.S. factories and distribution centers.

A relic from the past, St. Bernard's Ivorydale is the oldest of P&G's factory sites, dating to 1886 when it took its name from the company's new floating soap.

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Ivorydale operated various production lines until 2002, when Lafley, in his first term as CEO, started selling off most of the historic complex's factory operations. With the sales, P&G exited some businesses and sold others to outside companies that became P&G vendors. Analysts don't know which manufacturing operations P&G might cut or consolidate now, but the say the move is a sign the Cincinnati-based consumer products giant doesn't see robust growth returning to developed markets in the U.S. and Europe, where a similar review is being contemplated.

"P&G has an enormous opportunity to streamline its manufacturing operations given it is still a hodge-podge of plants," said Ali Dibadj, an analyst with Sanford Bernstein. He estimates the company will close three to five factories in the next few years – beyond the five being sold off with the pet food business.

IVORYDALE BUILT AFTER FIRE DESTROYED AN EARLIER P&G PLANT

Ivorydale was constructed after a fire destroyed an earlier P&G plant on Central Avenue. Chicago architect Solon Spencer Beman designed the more than 20 buildings on the 55-acre site 7 miles north of Downtown just as demand for Ivory soap was exploding. The iconic limestone and brick-trimmed buildings were all one-story tall – except for the two-story facilities holding soap boiling kettles.

Twenty-five years later, the complex grew even larger when P&G built a new plant to make Crisco shortening. At its height, Ivorydale boasted 2,000 workers making everything from Crest toothpaste to Duncan Hines cake mix.

The complex's role in P&G's manufacturing operations evolved as it built more factories elsewhere in the U.S., then overseas. In the 1990s, P&G consolidated production of bar soaps, laundry, shortening and oils to Ivorydale. A Tide factory making powdered detergent was closed in 1999 as consumers embraced liquid detergent.

P&G divested itself of almost all of its local manufacturing assets in a string of deals between 2002 and 2003 as Lafley sought a bold new direction for the sputtering company. Crisco shortening and vegetable oil was spun off to J.M. Smucker as Lafley accelerated P&G's exit from food brands. P&G sold its plant for making fat substitute Olestra to Twin Rivers Technologies investment group.

In P&G's last big cut at Ivorydale, the soap-making operation was sold in 2003 to Canadian manufacturer Trillium Personal Care. Doing business as the St. Bernard Soap Co., Trillium continued to make Ivory and Safeguard soap for P&G, but it also makes soaps for rivals like Kao Brands, Colgate-Palmolive and Unilever.

CEO LAFLEY'S GOAL: CUTTING COSTS, INEFFICIENCIES

Lafley returned as CEO last year after four years of inconsistent sales and profit growth under Bob McDonald. He quickly promised investors to refocus P&G on core businesses and to exit ventures that weren't growing the company.

Analysts say, though, that Lafley only has so many levers to pull. While he's working to jump-start sales, Lafley is working hard to cut costs.

Sixty percent of the $10 billion restructuring that P&G announced in 2012 and that has continued under Lafley is coming out of the supply chain: costs incurred by P&G's factories and distribution network. The company is building six new, large distribution centers across the U.S., including one near Dayton, as it also reviews operations at 40 smaller, existing facilities.

P&G's current review of manufacturing facilities could mean production is halted or reduced at some plants. It could mean expanding work at factories P&G decides to keep.

The dismantling of Ivorydale a decade ago illustrates that some factories could be sold along with waning businesses or outsourced to vendors.

Ivorydale is one of four chemical plants that P&G operates in the U.S. Analysts say the local factory's fate may depend on the sensitivity of the work it performs. Morningstar analyst Erin Lash said P&G might choose to retain the St. Bernard facility if its work includes formulating secret chemistry behind brands like Tide.

Five other P&G factories in North America – including one in Leipsic, 60 miles south of Toledo – will leave the fold late this year once the company closes a $2.9 billion deal selling its pet food business to Mars Inc.

Lafley's comments that P&G is embracing more versatile factories producing multiple brands suggest plants like those in St. Louis and Greensboro, North Carolina, are safe. The Missouri plant makes Febreze, Cascade and Mr. Clean. The North Carolina plant makes Secret, Old Spice and Crest.

Company officials acknowledge their manufacturing review but declined to say much more. "Close to a year ago, we announced a review of our North American supply chain with the objectives of improving customer service, responsiveness, work efficiencies and driving productivity," P&G said in a statement. "That review is currently underway."

"The U.S. and Europe are plodding along. It's a recognition that growth might not be be back for years."

P&G COMMENTS

Procter & Gamble executives on cutting factories and facilities

P&G CEO A.G. Lafley on Sept. 4: "We're studying options that will significantly reduce the number of manufacturing plants and distribution centers."

Lafley on Feb. 20: "We're just initiating the biggest change probably in the company's history, in our end-to-end supply chain in North America.... In North America today, we have 35 manufacturing facilities, only six of which are multi-business or multi-category. We're consolidating operations in the multi-category sites located closer to customers and consumers.... We're converting the common manufacturing platforms...."

P&G CFO Jon Moeller on April 23 3Q results call: "At the CAGNY conference, we announced the complete redesign of our end-to-end supply chain in North America.... We're consolidating operations into multi-category sites, located closer to the customers and consumers we serve.... We're examining the potential for similar improvements in Europe....